NYC777
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Is Airbus Caught In A Downdraft?

Mon Dec 27, 2004 11:21 pm

Commentary piece from Businessweek on Airbus. Enjoy.

http://www.businessweek.com/magazine/content/04_52/b3914067_mz054.htm
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keesje
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RE: Is Airbus Caught In A Downdraft?

Mon Dec 27, 2004 11:47 pm

Well this could of course be the case.

However looking at
- the order backlog,
- the lack of competition in the 200-300 and >500 seat for the next 4 yrs,
- the recent successes in the <200 seat area and
- the modern product portfolio

I would seriously doubt it.

 Smile

I taste some envy in the article (because of the selective info included).
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N754PR
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RE: Is Airbus Caught In A Downdraft?

Tue Dec 28, 2004 12:16 am

you can tell when something is doing very well...... there are so many rumours of how bad things are  Smile/happy/getting dizzy
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PVG
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RE: Is Airbus Caught In A Downdraft?

Tue Dec 28, 2004 12:18 am

Or, maybe the facade is about to fall off and they'll need papa (EU) to come to the rescue!
 
VS11
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RE: Is Airbus Caught In A Downdraft?

Tue Dec 28, 2004 12:21 am

It is also very interesting how "the bad" news/analysis re: Airbus tends to come from US sources.
 
PVG
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RE: Is Airbus Caught In A Downdraft?

Tue Dec 28, 2004 12:30 am

I read BW all the time and they do have alot of good things to say about European companies and have had good things to say about Airbus in the past. They also belong to the same parent company that produces AviationWeek, so they have good sources.

What they fail to mention is that it doesn't really matter since the European governments will just bailout Airbus anyway if they get in trouble. Seems to me that they tried to bait Boeing into making a dumb investment in a new 747 and Boeing didn't take the bait and instead has reversed the tables on them.
 
N79969
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RE: Is Airbus Caught In A Downdraft?

Tue Dec 28, 2004 12:36 am

Business Week has identified some issues that probably would concern real investors. Rather than usual Euro-whining/Blame America First smarmy remarks, how about addressing some of the actual points raised in the editorial?
 
cwapilot
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RE: Is Airbus Caught In A Downdraft?

Tue Dec 28, 2004 12:40 am

"It is also very interesting how "the bad" news/analysis re: Airbus tends to come from US sources. "
--I think it's more revealing of the nature of European media than American media. Rule #1: Never, ever, EVER question the sacred (cash) cow. The U.S. media are as willing to report on woes at Boeing as they are at Airbus.

"you can tell when something is doing very well...... there are so many rumours of how bad things are "
--Or, anything even remotely hinting at negative regarding Airbus is written off in this way, and every "sky is falling" rumor about Boeing is regarded as Gospel truth by some on this board.

The article, overall, if you are able to look around your "Airbus is the Second Coming of Jesus" bias, is very complimentary of Airbus. It merely points out that the cost overruns, known to most "US sources" for some time, were only recently admitted to, and are worsened by the currency exchange rate as well as an incredibly expensive, 11th hour reaction to a Boeing product they will still not be able to match...sort of the same thing they had criticized Boeing for RE the A380/747X situation. They said the A330 was enough and then, a la Boeing, they reverse course and come out with a bunch of numbers attached to an image of an A330 with "A350" painted on it. While they are doing great, the backlog will be the only thing going for them in the short term...the "modern product lineup" continues to age as we speak, and will only be replaced by upgrades for the foreseeable future (what they criticized Boeing for for years) while Boeing continues to turn out fresh designs. The lack of competition in the 200-300 seat range was closed 6 months ago, if you hadn't noticed, and I don't see Boeing suffering in the 737 category either. In fact, a brand new, from scratch replacement is forthcoming.

Not everything is rosy at A or B...however, B seems to have bottomed out and is on the rebound, while A is hitting their crest, and is set to hit some rough spots...at least according to the people who make a career out of knowing about these things at Business Week.


[Edited 2004-12-27 16:46:32]
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solnabo
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RE: Is Airbus Caught In A Downdraft?

Tue Dec 28, 2004 12:45 am



".....or they need papa (EU) to come to the rescue"

I dont think we need the pope´s approval, PVG!!  Nuts

Micke//SE  Laugh out loud
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N79969
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RE: Is Airbus Caught In A Downdraft?

Tue Dec 28, 2004 12:48 am

Solnabo,

I suggest a reading "enrichment" course that are offered between high school and college.
 
Sjoerd
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RE: Is Airbus Caught In A Downdraft?

Tue Dec 28, 2004 12:50 am

Don't forget Boeing had to turn to Japan to develop the B7E7. Airbus is still doing most of the work itself, but if necessary Airbus can do the same and look to China or Russia to work (and invest) with them for a new plane.

Airbus has a backlog of 1500 planes, Boeing's backlog counts 1000 planes.

The A350 will endanger the B777 (Boeing's topseller at the moment).

The A320 seems to be winning all major orders.

Airbus can easily counter a B747Adv (if Boeing builds one) with an A387.

Boeing is trying to turn to the tide by making people believe things that are not true. If you look at the facts you know. On the other hand perception is everything...
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DAYflyer
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RE: Is Airbus Caught In A Downdraft?

Tue Dec 28, 2004 12:52 am

Airbus is undoubtedly in for some turbulence. Internal management bickering and 2 major programs underway is a lot foranyone to bite off. The same thing almost happened at Boeing 30 years ago when they developed the 747, 727 and 737 programs all pretty much on top of each other.

Cost overruns, delays, and engine problems on 747 almost put them under. Sounds like the type of cenario for Airbus. But I'm sure that they will go to France & Germany for a bail out.
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knoxibus
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RE: Is Airbus Caught In A Downdraft?

Tue Dec 28, 2004 12:53 am

"But these aren't the kinds of numbers investors like."

This is the conclusion of the article, but then again that does not mean that they will not keep on making good aircraft and continue selling them....

Another thing they did not emphasise on is the fact that the budget overrun on the A380 is "forecasted", i.e. that means the money is not spent yet, and that A might still provide some last-minute efforts to counter this overrun.

Personally, I do agree that B has the best strategy for the coming years, with a bigger revenue due to a higher number of widebodies being sold, and a new desing for single aisle from 2010.

I believe it's true that B is on the rebound and A is on the descending slope. But still, it's still going to be 50/50 or 60/40 from now on and everybody knowns that.
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NYC777
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RE: Is Airbus Caught In A Downdraft?

Tue Dec 28, 2004 12:59 am

Don't forget Boeing had to turn to Japan to develop the B7E7. Airbus is still doing most of the work itself, but if necessary Airbus can do the same and look to China or Russia to work (and invest) with them for a new plane

It's a Boeing plane and a Boeing design, by your logic then the 7E7 is also being developed byFinemeccania/Vought (a notable Airbus partner). Typical A supporter..trying to muddy crystal clear waters. By the way, the socialist govts. in Europe will never allow Airbus to outsource major structures work to Asia. Get real!

The A350 will endanger the B777 (Boeing's topseller at the moment).

Funny all you A supporters out there say it's a counter to the 7E7, now it's a counter to the 777NG...MAKE UP YOUR MIND, WILL YA!!!!

Airbus can easily counter a B747Adv (if Boeing builds one) with an A387.

Oh really? And also risk cannabalizing the A388 line? That's smart. And how much will this one go over budget and over weight, hmmm?


[Edited 2004-12-27 17:14:25]
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cwapilot
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RE: Is Airbus Caught In A Downdraft?

Tue Dec 28, 2004 1:03 am

"Don't forget Boeing had to turn to Japan to develop the B7E7. Airbus is still doing most of the work itself, but if necessary Airbus can do the same and look to China or Russia to work (and invest) with them for a new plane."
--Ummmm.....how many countries (aside from subcontractors) are involved in developing and building Airbus planes? I thought this international involvement was part of the genius of Airbus, and that Boeing is doing well to emulate that practice.

--The A350 may or may not endanger any plane in the Boeing lineup. Again, all we have is some salesman's claims and a retouched A330 picture. The A320 won a couple of recent orders, and I guess that means Boeing should shut down the 737 line...

The point is, whereas Boeing was trapped in a mode of REACTING to Airbus for many years, Airbus is now entering a cycle of REACTING to Boeing. A350...half measure reaction to the 7E7. A387...REACTION to a 747 ADV. A32X upgrades, a REACTION to the smaller 7e7 derivatives. It doesn't mean they will crash and burn. It merely suggests that the "perception" that some would like everyone to have that everything is all roses at Airbus while Boeing HQ is about to be hit by an asteroid, isn't quite true.
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mariner
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RE: Is Airbus Caught In A Downdraft?

Tue Dec 28, 2004 1:12 am

Oh, guys, take off your A or B hats.

The article isn't saying that Airbus is about to fail or Boeing about to triumph.

It isn't even written for airplane people - it is written for stock market investors.

It suggests that, for several reasons - the cost over-runs and the fall of the dollar v. the euro - shares in EADS may feel some downdraft.

cheers

mariner
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DfwRevolution
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RE: Is Airbus Caught In A Downdraft?

Tue Dec 28, 2004 1:42 am

Airbus can easily counter a B747Adv (if Boeing builds one) with an A387.

That's highly unlikely, the A388 is built for growth, not shrinking. In the mid-stages of development, like 1995-2000, Airbus was still talking about a shrunken A387, but that stopped as the design was finalized. The final A380 design is built with a heavier wing to make more stringent LHR noise requirements as well as stronger to allow for a stretched A389.

If the A387 were to be built, it would essentially be a double-shrink of the A389 rather than a single shrink of the A388. The economic comparisons between the A380 and 744 are dependent on the greater seating capacity of the A388, and if Airbus were to remove seats (A387) while Boeing plans to add seats (747-Adv), the economic performance of the A387 would be in question.

The A320 seems to be winning all major orders.

This, IMO, is more of a reaction to the 7E7 than anything. One of the reasons SQ sited for passing on the 7E7 was uncertainty at regional traffic flow because of an influx of LCC in South Asia. Who were flooding the LCC market with narrow-body aircraft at that time? Airbus with the A320..... not a coincidence IMO.

Airbus can't yet offer a true 7E7-3 competitor, but they can put A320/A321 into as many hands as possible.

Don't forget Boeing had to turn to Japan to develop the B7E7. Airbus is still doing most of the work itself, but if necessary Airbus can do the same and look to China or Russia to work (and invest) with them for a new plane.

Uhh.... Airbus has never "done most of the work itself." Airbus has been an aircraft final assembler, not builder, since the A300B2 rolled-out in the 1970s. Boeing is simply adapting the method Airbus has been using for the last 30+ years.  Big grin

However looking at
- the modern product portfolio


That "modern portfolio" is going to need some review in the next few years: the key product in Airbus family, the A320, will roughly 25 years old in 2010. Airbus cannot count on the success they have had for the last 2 years in the narrow-body segment to continue unchallenged for another 6 years.

I remind everyone that the 737NG was slaughtering the A320 from 2000-2002, then Airbus reversed the trend from 2003-2004. Since neither aircraft have undergone a major technology revamp, it is well within the realm of possibility to assume Boeing will "fight back" in the coming years. The upheaval within Boeing's sales team probably means this will happen sooner than later, IMO.
 
Udo
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RE: Is Airbus Caught In A Downdraft?

Tue Dec 28, 2004 2:00 am

Or, maybe the facade is about to fall off and they'll need papa (EU) to come to the rescue!

Actually, since papa (EU) is partly bankrupt (Germany), Airbus will instead turn to new papa China again and again and ask for some more political orders…  Wink/being sarcastic


It is also very interesting how "the bad" news/analysis re: Airbus tends to come from US sources.

The fact that negative forecasts on Airbus mainly come from the U.S. is such a surprise that it really makes me  Yawn


What they fail to mention is that it doesn't really matter since the European governments will just bailout Airbus anyway if they get in trouble.

Hm, then I suggest the German government should immediately go ahead and get some shares in EADS, since the German part in Airbus is only represented by a private company called DaimlerChrysler…  Smile/happy/getting dizzy


Seems to me that they tried to bait Boeing into making a dumb investment in a new 747 and Boeing didn't take the bait and instead has reversed the tables on them.

And what would Airbus have gained from such a move? Kicking Boeing out of Business? No way. Airbus can be glad about Boeing not investing in a (re)new(ed) B747, as no sales will be taken away from the A380.


They said the A330 was enough and then, a la Boeing, they reverse course and come out with a bunch of numbers attached to an image of an A330 with "A350" painted on it.

No surprise here, the game’s called PR.


While they are doing great, the backlog will be the only thing going for them in the short term...

Who told you that? Nostradamus?  Wink/being sarcastic


the "modern product lineup" continues to age as we speak,

And so does Boeing’s (B737, B747, B777).


and will only be replaced by upgrades for the foreseeable future (what they criticized Boeing for for years) while Boeing continues to turn out fresh designs.

First of all Airbus will have an all-new design from 2006. Second, product updates can still be successful. Don’t forget the A320 has not seen a major update since its introduction. They could follow Boeing’s way with turning the B737 classic into a B737NG.
And apart from the B7E7, where’s another fresh design from Boeing?


I don't see Boeing suffering in the 737 category either. In fact, a brand new, from scratch replacement is forthcoming.

When?


at least according to the people who make a career out of knowing about these things at Business Week.

Excellent observation. It depends on the point of view.


But I'm sure that they will go to France & Germany for a bail out.

Why would they go to France and Germany? They are already there…  Wink/being sarcastic


By the way, the socialist govts. in Europe will never allow Airbus to outsource major structures work to Asia. Get real!

Socialist government? Strange, don’t we live in Europe of 2004? Is it possible that some individuals from the Land of the Free don’t really know what “socialism” means?  Wink/being sarcastic


Funny all you A supporters out there say it's a counter to the 7E7, now it's a counter to the 777NG...MAKE UP YOUR MIND, WILL YA!!!!

Make up your mind, will ya?  Smile/happy/getting dizzy


Oh really? And also risk cannabalizing the A388 line? That's smart. And how much will this one go over budget and over weight, hmmm?

Good question. Probably it will be as much over budget as the Sonic Cruiser was away from reality…  Wink/being sarcastic


The A320 won a couple of recent orders, and I guess that means Boeing should shut down the 737 line...

Huh? Who has made such a rather odd suggestion?


A387...REACTION to a 747 ADV.

As long as the B747 ADV is put on and off the drawing board every two months, there’s no need to react.


A32X upgrades, a REACTION to the smaller 7e7 derivatives.

Smaller B7E7 derivatives? Which ones?



Regards
Udo
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DfwRevolution
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RE: Is Airbus Caught In A Downdraft?

Tue Dec 28, 2004 2:18 am

Good question. Probably it will be as much over budget as the Sonic Cruiser was away from reality…

Well Foregard was publically told us the A380 is over-budget, and for the last time, the Sonic Cruiser was a case study that Boeing was trying to judge customer opinions on. We know this because the 7E7 is basically the Sonic Cruiser technology incarnated.....

Smaller B7E7 derivatives? Which ones?

Around March 2004, Southwest Airlines, the single most influential 737NG customer, publically stated that they were very interested in a "737-sized aircraft with 7E7 technology." The 737NG will be reaching old-age by 2010-2015, WN will need an aircraft for growth and 737-300/500 replacement, and Boeing will have no other aircraft in design phase at this time. Many have speculated that a 737NG replacement (AKA 737-X) will come at this time.

Some sources (as in, not me but people who do this for a living) are indicating a new cross-section, and two wings to accomidate 90-220 seat variants with 2,000-4,000 nm range. It is speculation only, but it isn't absurd speculation either.
 
jacobin777
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RE: Is Airbus Caught In A Downdraft?

Tue Dec 28, 2004 2:34 am

actually, what I found VERY interesting was this part of the article:

"Forgeard didn't make clear that even before the recently acknowledged cost overruns, development costs had soared far above the original $10.7 billion estimate, as the dollar has declined 30% against the euro since the project's start in 2000. On Dec. 14, EADS finally fessed up. The total price tag, including the overruns is at least $15.9 billion. "

yes....Forgeard said it might maximally be $2 billion, but I wouldn't be suprised if he was talking in 2000 dollars, this article brings it more to the point, and if true, it would turn out to be a HUGE subsidy and WAYYYYY overbudget!

we're talking possibly of $5.2 billion dollars overbudget........oh well..there is always the European taxpayers to bail this project out..  Big grin
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Udo
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RE: Is Airbus Caught In A Downdraft?

Tue Dec 28, 2004 2:43 am

oh well..there is always the European taxpayers to bail this project out..

I'm sure you can explain to me how a bankrupt country like mine would be able to pay for that? And why should the German taxpayers pay at all - isn't it DaimlerChrysler which is the German part in EADS? And last time I checked, DaimlerChrysler was a private company.
Now I wanna hear some ideas, not just the usual "European taxpayer will do this will do that blabla"...


Regards
Udo
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LON-CHI
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RE: Is Airbus Caught In A Downdraft?

Tue Dec 28, 2004 2:57 am

And why should the German taxpayers pay at all - isn't it DaimlerChrysler which is the German part in EADS?

That's a question you should ask your goverment if/when Airbus requests a bailout/subsidy.
 
airways6max
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RE: Is Airbus Caught In A Downdraft?

Tue Dec 28, 2004 3:34 am

Airbus is flying sky-high so I don't believe they have any problems now.
 
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PanAm_DC10
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RE: Is Airbus Caught In A Downdraft?

Tue Dec 28, 2004 3:38 am

I'm sure you can explain to me how a bankrupt country like mine would be able to pay for that?

Since when has Germany been bankrupt?
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AeroWesty
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RE: Is Airbus Caught In A Downdraft?

Tue Dec 28, 2004 3:48 am

Traders love Business Week. Articles like this one cause investors to move money in and out of stocks and bonds, generating commissions.

So what did this article really say?

1) Forgeard might have a new title by the Jan 18th A380 rollout.

2) The A350 may replace the A330. Not will, may. Customers will decide that, no one else. If the A330 continues to be popular, you can bet Airbus will still build them.

3) The A350 can't be developed out of cash flow due to cost overruns with the A380. So let's be realistic where the development costs will come from. Either subsidies or loans.

4) Airbus' R&D costs are about 5% higher than Boeing's.

5) Airbus leads Boeing in aircraft deliveries. It doesn't say if it leads Boeing in wide-body vs. narrow-body aircraft or in profitable vs. loss-leader aircraft or in total number of seats put into the air.

6) A380 costs are about 50% higher than originally forecast, partly due to the dollar's decline against the euro.

The article also owned up Airbus to some of the hot air they've been blowing regards to the A330 vs. the 7E7.

It also acknowledges Forgeard has built a "powerful company in Airbus."

Aircraft building carries a lot of risk. BusinessWeek is pointing out what risks Airbus currently faces. Nothing more, nothing less. What you do with that information is what makes markets move.

I don't see any jealousy, or any of the other things people in this thread have stated to fan the A vs. B flames.

It's all in the interpretation, and what you do with that information that's of benefit to the people this magazine is written for. And it's not investors, it's traders.

Cheers, AeroWesty
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NumberTwelve
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RE: Is Airbus Caught In A Downdraft?

Tue Dec 28, 2004 3:48 am

G'day, PANAM, you're right: we Germans are inclined to cry when we are not as successfull as we've been years ago.

And guys, don't lets talk about so-called subsidies - even Amtrack gets them as I read in another threat. Is socialism coming to the US? Ooooops  Wink/being sarcastic

And concerning the downdraft: in Germany we would say "Da war der Wunsch der Vater des Gedankens" which means: you wish and so you always thinking about it - but also means: that's nonsense
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Udo
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RE: Is Airbus Caught In A Downdraft?

Tue Dec 28, 2004 4:16 am

hat's a question you should ask your goverment if/when Airbus requests a bailout/subsidy.

That’s no answer to my question – you just re-bubble the same biased verbal outcomings again. Apart from the fact that the German government has no direct shares in EADS (as I already mentioned some 100 times) – it would not be possible for Germany to spend some billions here and some billions there immediately just because Airbus decides to cry out for help. In what kind of dream world do some of you guys live? Education powered by Fox News and Disneyland?  Wink/being sarcastic


Since when has Germany been bankrupt?

Don’t take it too literally – but our financial problems have been extremely serious since the German reunification. Never heard about?


G'day, PANAM, you're right: we Germans are inclined to cry when we are not as successfull as we've been years ago.

I fear all those people affected by our record unemployment rate and all those hit by growing poverty would prefer to disagree…  Insane



Regards
Udo
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sllevin
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RE: Is Airbus Caught In A Downdraft?

Tue Dec 28, 2004 4:22 am

I think a strong undercurrent is that Airbus has handled its PR poorly (we're talking about on the investment side, not the sales side). Airbus hedged and hedged and hedged about the impact of the exchange rate. In financial circles, it's been accepted that the Euro is going to trade significantly strong than the dollar for a while now.

Combined with the initial waffling about cost overruns, it's just a picture that, while not doom, is not one that thrills investors. Investors are typically conservative and wondering "well, what comes next?"

For the A380, the cost overruns represent an additional 8 million dollars per airframe of encumbrance, if we stay with the 250 break-even point. Total R&D encumbrance has now risen to $64 million/airframe.

Steve
 
mdundon
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RE: Is Airbus Caught In A Downdraft?

Tue Dec 28, 2004 4:23 am

If you look at the last issue of Aviation Week and Space Technology, the real danger to Airbus is hubris. They desperately want a slice of the growing US Defense Department's business, yet their actions (i.e. the full use of subsidies for developing the A350) are bound to make them even less popular to members of the US Congress. It is more than likely that the management of Airbus will be unable to shake off its 'European' identity in order to win any significant role in US defense procurement. The more 'French' the company becomes, the less likely it will ever be accepted by the Pentagon regardless of what John McCain says. The sine qua non of winning US defense work will be the end of commercial subsidies.

At the end of the day, we have a clash of values between Europeans and Americans--Americans believe that what the Europeans see as 'subsidies' to Boeing from the military side are nothing more than the just rewards of making investments in your own defense. What I find odd is that EADS has made the diversification of its revenues (i.e. to increase the portion derived from the military) a major priority. If it looks more like Boeing in the future, will it still be able to make the case for its so-called 'launch aid'?
 
Planesmart
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RE: Is Airbus Caught In A Downdraft?

Tue Dec 28, 2004 4:56 am

The key difference the article highlights is the gap in margins per airframe between the 2 companies.

With falling production rates for 747, 767 and 737, plus under-utilised McD facilities, this gap may get bigger pre-2008.

The article repeats previously announced info, including the numbers.

The financial markets, on both sides of the ditch are notorious for so-called revelations/exposes at this time of year. It's how you generate trades at a time when otherwise there would be a lot less than usual, and your fee income would be low.

And of course publishers struggle for article material too at this time of year.
 
FCKC
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RE: Is Airbus Caught In A Downdraft?

Tue Dec 28, 2004 5:09 am

As somebody said in this thread , the A350 will NOT replace the A330 (referring to the Airbus announcement) , but will be built on the same assembly line.Surely the C/Ns of the A350 will follow those of the A330 , and will not beginn by C/N 1.Only the market will tell if the A350 will kill the A330.If this is the case and if the A350 will sell well , doesn't matter as it will be priced higher than a A330 , regenering more money for Airbus !!!!!!!

This plane has been launched to counter BOTH 777-200ER and 7E7-8 , but NOT the 7E7-3 , as surely the market for this last one is small .Airbus targeting the airlines with high yield such as Emirates , Qatar and perhaps SIA.
 
gigneil
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RE: Is Airbus Caught In A Downdraft?

Tue Dec 28, 2004 5:34 am

That's a question you should ask your goverment if/when Airbus requests a bailout/subsidy.

And how, exactly would they do that?

I don't disagree, Airbus' shares are going to be under significant pressure. The overages on the 380 and looming doubt about the 350's competitiveness is going to cause significant churn in institutional holdings of EADS.

But this crap that the uninformed keep throwing out about bailouts and subsidies is ridiculous. Airbus receives legal launch aid under a 1992 agreement reconfirmed later in the decade. That doesn't give them license to run back to the government every time the market declines and ask for a cash infusion. It doesn't work that way, and you've all been told so repeatedly by far more intelligent people than myself.

Make your New Year's resolution to not be an uninformed idiot.

N
 
jacobin777
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RE: Is Airbus Caught In A Downdraft?

Tue Dec 28, 2004 6:02 am

"based on your comments, I would be surprised if you could show Europe on the map"

maybe you need to learn a bit of history and learn who the "Jacobins" were.....  Yeah sure

I only happened to lived in the United Kingdom for a while..gee..last time I remembered, the United Kingdom was considered part of Europe..  Big grin


"But this crap that the uninformed keep throwing out about bailouts and subsidies is ridiculous"

say what you want, and put any spin that you want, but Airbus doesn't have to pay back their "loans" until they make a profit.....what a difficult situation they have..
"Up the Irons!"
 
gigneil
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RE: Is Airbus Caught In A Downdraft?

Tue Dec 28, 2004 6:11 am

Launch aid. 33% or less of the development cost of any new airframe program. Has nothing to do with the general cash funds of the company, the sale price of an airplane, or any other aspect of the business. Not to mention the other 67% of the funding for an airframe project.

Why don't you list for me the loans Airbus has outstanding that they haven't been paying back. Can you do it?

Airbus hasn't even sold an A380, yet they've been paying back the launch aid loans on it.

Again, you simply just don't know what you're talking about, and that's not spin.

N

[Edited 2004-12-27 22:18:23]
 
LON-CHI
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RE: Is Airbus Caught In A Downdraft?

Tue Dec 28, 2004 7:02 am

Launch aid. Shifts the risk from Airbus to the European governments because the manufacturer isn't required to repay if the aircraft program is unsuccessful. Such aid shields Airbus from risk, allowing it to price its airplanes more aggressively. It's been estimated that Airbus has received $15 Billion in launch aid over the years, which would amount to a $35 billion debt on the company's books today if it had borrowed that money commercially.


 
airways45
Posts: 282
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RE: Is Airbus Caught In A Downdraft?

Tue Dec 28, 2004 7:26 am

For the first time since Airbus entered the market in 1974, Airbus and Boeing will have a new product on offer to airlines at the same time. The 7E7 and the A350, both essentially do the same job. Both are currently being offered to airlines (the A350 was given the green light by EADS at the start of December), both have two variants, both have the same engines though initially the A350 is being offered only with the GENx option (though Airbus is hoping to be able to offer the Rolls-Royce Trent 1000).

Of course Airbus and Boeing have competing product ranges already but they arrived on the scene at different times. Boeing is touting its all new design, Airbus is pointing to commonality with its other offerings. The market seems keen that two aircraft are offered. Stepping back a few months Boeing was looking for 500 orders by the first flight in 2007. Observers were saying this would have a major effect on the A330. Airbus was claiming that the A330 could match the 7E7 on a seat mile basis, but then they would say that given that the A330 was larger.

However, whilst the 7E7 was stealing the headlines many were caught by surprise that Airbus revealed the A350 so soon, and to be flying around the same time as the 7E7. The 7E7 is replacing late 1970s technology in the 757 and 767 whereas the A350 is replacing late 1980s technology. The product lifecycles of aircraft are certainly shortening. If Airbus hadn’t launched the A350 then the A330 would have gone the way that the 767-300ER went compared to the A330. The 7E7 and A350 are buoyed by the desire of airlines to simplify their fleets, reduce costs, reduce fuel consumption, emulate the low cost carriers and generally become far more efficient. Since those that do not follow this path will not survive (unless they are propped up by a national government).

More interesting will be the effect on future A380 sales. Airbus and Boeing have long had a media spat over the market for point to point aircraft versus hub and spoke aircraft. Airbus claims that congestion at airports and the desire by airlines for the lowest seat mile costs produces a strong economic argument for the A380. Boeing meanwhile argue that the market has fragmented and that passengers demand more direct flights from regional airports. These demand smaller more efficient aircraft to get seat mile costs down, hence the 7E7.

By Airbus matching the 7E7 with the A350 this has shown Boeing that Airbus does indeed see a market for this type of aircraft. So, will the two different markets (hub and spoke and point to point) be large enough to justify the A380, 7E7 and A350? The initial enthusiasm for the A350 has not been matched by huge sales for the 7E7. However, the A380 has hardly been selling like hot cakes either. It is indeed interesting times!
 
Planesmart
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RE: Is Airbus Caught In A Downdraft?

Tue Dec 28, 2004 7:33 am

LON-CHI

"Launch aid. Shifts the risk from Airbus to the European governments because the manufacturer isn't required to repay if the aircraft program is unsuccessful. Such aid shields Airbus from risk, allowing it to price its airplanes more aggressively. It's been estimated that Airbus has received $15 Billion in launch aid over the years, which would amount to a $35 billion debt on the company's books today if it had borrowed that money commercially."

Assuming your $15 & 35bn figures are correct, you assume two things - A rec'd 100% launch aid funding on EVERY model, AND, every project was 100% unsuccessful. If launch funding for successful project 1 is repaid, then project 2 launch funding is simply drawing down the same funds again (inflation adjusted) for the next project.

Having been born in, and lived in Europe for most of my life, and dealt with senior government officials and politicians, i can assure you launching unsuccessful projects that do not repay loans to European governments, is guaranteed to see the demise of any joint venture / co-operation. And do you for one moment imagine it is easier to obtain funding approvals from multiple governments (politicians and red tape officials) compared to syndicated funding arranged by one lead banker?

Every A model in the last 20yrs has >50% commercial funding, being a mix of supplier and A raised finance. Govt loans are not subordinated for repayment behind the commercial loans. And i don't know where the idea loans are forgiven if projects are unsuccessful (are we talking abt the original A30 model funding?)

The finance sector are experts at identifying and assessing risk. The greatest risk for A is not product development, but political.

The commercial finance sector would be keen to play a larger role in A model funding. The sector would also like a bigger part of the 7e7 too, but you can't compete with cheap Japanese govt funding. But thats different isn't it!!!
 
Reggaebird
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RE: Is Airbus Caught In A Downdraft?

Tue Dec 28, 2004 8:02 am


You may ridicule this but...I dare say that the big shock to Airbuse is going to come when Boeing debuts either a dramatically new and efficient design to replace the 737NG or a yet-unannounced but enhanced and enlarged version of the 787 (let's use it's real name) that can be configured to fly at Mach 1.5 with the same fuel and same range...without a sonic boom.

Reggaebird

 
muttley35
Posts: 124
Joined: Fri Jul 09, 2004 4:45 pm

RE: Is Airbus Caught In A Downdraft?

Tue Dec 28, 2004 8:11 am

And for everyone other than Nyc777, every week there is a at least one A versus B thread posted.Usually on the A side we have the blindly Euro biased and on the B side the blindly US biased and in the middle what you could call "the rest of us".
When a thread starts with a negative to either of these great companies and includes within the opening line "enjoy", which of the afore mentioned groups would you categories the postee ?
My aviation knowledge is at best limited and as someone once wrote if I don't have the answer someone within A.net certainly does ( concordeboy) which is why I ask questions and read informed posts with total respect.
With hindsight my post was a tad disrespectful but I have to say the whole A versus B thing is tedious at best.
And just to try and cover all the bases which no doubt I haven't I am not anti American/ Boeing in any way.
Ask my American wife
 
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glideslope
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RE: Is Airbus Caught In A Downdraft?

Tue Dec 28, 2004 9:49 am


Wait until China begins to build their own Commercial Jets. A vs B vs C.
To know your Enemy, you must become your Enemy.” Sun Tzu
 
StickShaker
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RE: Is Airbus Caught In A Downdraft?

Tue Dec 28, 2004 11:37 am

The product lifecycles of aircraft are certainly shortening

The launch of the 7e7 together with the 350 will likely shorten the careers of several aircraft models - 332,333,343,772. Some of these aircraft are quite young (332 has only been in service 6 years). If the lifecycle of aircraft models is to be reduced from the traditional 20 years or so down to 10 years or less then it makes it much harder for manufacturers to achieve a suitable return on the massive R&D investments required to produce them.

In the next 10 to 15 years both Airbus and Boeing are likely to require huge R&D funding as more and more segments of their product lines are converted to composites/light alloys.
Boeing is developing 3 7e7 models up until 2008, will likely launch a composite 737 soon after and possibly a composite 772 at some stage (7e7-10).
Airbus are developing the 380, soon the 350 and will be compelled to develop a lightweight 320 lineup once Boeing launches their 737 replacement.

Thats quite a few billion dollars over the next 10-15 years. If the lifecycles of these aircraft are going to be shorter (or if they displace other young models) then that will place pressure on margins and prices to acheive a satisfactory return. There will be significant benefits for airlines and passengers with so many wonderful new high tech aircraft but the R&D (or lost ROI on displaced aircraft) will have to be recouped at some stage.
Boeing could be hesitating on launching the 747Adv because they feel the $4B or so would be better spent on other composite projects (737).

Interesting times ahead.


Cheers,
StickShaker
 
A340600
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RE: Is Airbus Caught In A Downdraft?

Tue Dec 28, 2004 11:41 am

If Airbus hadn’t launched the A350 then the A330 would have gone the way that the 767-300ER went compared to the A330.

I couldn't disagree more. This is an insane comparison!

Sam
Despite the name I am a Boeing man through and through!
 
a380900
Posts: 799
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RE: Is Airbus Caught In A Downdraft?

Tue Dec 28, 2004 11:56 am

Well maybe the Earth is flat, up is down, and Airbus is doing bad and Boeing's airliners' division is on the rebound!

Well sorry to disappoint all the naysayers on this board but Boeing is selling only 777s and 737s at this point, of which only the 777 is really a modern airplane (I mean come on, the 737 is an extreme make over as sales begin to show).

If one had to bet on who will produce more aircraft and make more money over the next ten years (in the airliners' business), only the boeing jihadist would bet on Boeing.
 
NYC777
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RE: Is Airbus Caught In A Downdraft?

Tue Dec 28, 2004 12:02 pm

Muttley35,
Never assume anything. I didn't provide the link to the article to start a A v. B war as you alledge. I include the word "enjoy" in all my posts whenever I provide links to articles I thought would be relevent to this forum ( which includeds articles that are positive to Aribus as well as Boeing). From the look of responses to the thread that I started there has been a lot of positive discussion as well as negative ones (including yours which I did not start but would surely respond to).

In this case you are way off in your assesment and that is why I have asked the moderator to delete your post.
That which does not kill me makes me stronger.
 
A330Jamaica
Posts: 56
Joined: Sat Dec 13, 2003 11:14 am

RE: CO Stocks Plummet!

Tue Dec 28, 2004 12:04 pm

Every now and then, I feel the need to chime in and illustrate the uselessness of bickering over which aerospace company is doing well and which is not. I have said over and over that both Airbus and Boeing and going to be royally screwed in the near future as peak oil is reached. Civil aviation is not going to be a growth industry from around 2010, give or take a few years, just when the 7E7 and competition is coming onstream and the market collapsing under the A380. If I were Boeing and Airbus, I would be seriously looking into rail transport vehicles. That may be more viable when oil peaks. Remember, an airliner can last 30 years. The energy supply will not be there to fuel the aircraft over its expected life expectancy.

Check out http://www.peakoil.net, http://www.peakoil.com, http://www.wolfatthedoor.com, http://www.globalpublicmedia.com and many others for further research. The facts presented are indisputable.
 
Ken777
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RE: Is Airbus Caught In A Downdraft?

Tue Dec 28, 2004 2:27 pm

Airbus does have some issues to deal with. The 380 cost overruns are significant, especially when sales of the 380 have probably been in US Dollars - and a lot of those sales were made when the Dollar was a lot stronger than it is today. If one assumes that the major orders protected the airlines from the dollar fluctuations then Airbus needs to have hedged significantly.

The challenge for A at this time is to get their costs in order, especially the costs per plane delivered. At the same time they need to have hedging (or other protections) in place to keep the low Dollar from killing their profits, especially on the 380s.

Then they need to review the importance of the 350 program - and their ability to control development costs. If both the 380 and 350 come in at $5 billion over for each plane they will have a significant problem.

I do believe that B will offer the 747ADV for sale in 2005 and that plane will effectively fill in the gap between the 777 and the 380. The more technology they bring from the 7E7 program the more difficult it will be for A to compete in that market - just as it is most difficult for B to look at competing in the 380 market. The lower dollar is going to make a 747ADV look a lot more attractive than it would have a year ago.

I also think that B is in a better position for moving 7E7 technology to the 737 ling than a lot of people think. They are fortunate in having a relationship with Southwest that may support a move sooner than originally planned.

In general, 2005 is shaping up to be an interesting year for readers for this board. The 380 will take flight, orders will firm up for the 7E7, the 350 will be presented in far greater detail and we'll know what the situation is with the 747ADV. Those 4 programs alone will make for an interesting year and we should sit back and enjoy it.

Happy Holidays and all the best for the New Year!
 
StickShaker
Posts: 620
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RE: Is Airbus Caught In A Downdraft?

Tue Dec 28, 2004 3:15 pm

The challenge for A at this time is to get their costs in order, especially the costs per plane delivered. At the same time they need to have hedging (or other protections) in place to keep the low Dollar from killing their profits

The lower dollar is going to make a 747ADV look a lot more attractive than it would have a year ago.



With the lower dollar vs euro and adoption of cheaper manufacturing/assembly processes together with risk sharing partners Boeing may soon find themselves losing far less sales due to aggressive discounting by Airbus. The high prices for the 2 350 models may give some indication as to the cost pressures being felt at Airbus.


Cheers,
StickShaker

 
atmx2000
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RE: Is Airbus Caught In A Downdraft?

Tue Dec 28, 2004 4:03 pm

Maybe Airbus will move some of its production to eastern Europe eurozone countries to reduce its labor costs. It will secure some loyalty from a region that will likely see a large increase in air traffic. Of course it won't do anything for the German and French unemployment rates, and will make western European governments less willing to give launch aid.
ConcordeBoy is a twin supremacist!! He supports quadicide!!
 
FriendlySkies
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RE: Is Airbus Caught In A Downdraft?

Tue Dec 28, 2004 4:04 pm

If Airbus hadn’t launched the A350 then the A330 would have gone the way that the 767-300ER went compared to the A330.

I couldn't disagree more. This is an insane comparison!


I couldn't disagree more with that comment. It's a perfect comparison, as Airbus would be in the SAME situation Boeing was in when the A330 came out. Airbus would have an inferior product (A330) compared to Boeing (7E7). There's no way around that, ask any engineer. Airbus would start losing sales to the 7E7, just like what happened to the 767 line at Boeing.
 
widebody
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RE: Is Airbus Caught In A Downdraft?

Tue Dec 28, 2004 6:34 pm

The article makes some good points, but once again it seems this subsidy issue gets dragged into everything on this site. Let me state a simple fact and leave it at that: The Airbus launch aid is legal according to the WTO agreement. The Japanese contribution to the 7E7 is not. Regardless of what side of the water you're on, and whatever your thoughts, this is a fact.

And a second more cloudy fact to finish; Airbus aid is repayable with conditions. Boeing aid is not repayable at all.

So many see Boeing as the Virgin Mary. They're both partners in crime.

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